The decumulation period of a personal pension with risk sharing: investment approach versus consumption approach
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Published:2018-10-29
Issue:2
Volume:19
Page:262-291
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ISSN:1474-7472
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Container-title:Journal of Pension Economics and Finance
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language:en
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Short-container-title:Journal of Pension Economics and Finance
Author:
van Bilsen Servaas,Lans Bovenberg A.
Abstract
AbstractThis paper models the decumulation period of a Personal Pension with Risk sharing (PPR). We derive several relationships between the contract parameters. Individuals can adopt two approaches to the decumulation period of a PPR: the investment approach and the consumption approach. In the investment approach, individuals specify how to invest wealth and how much wealth to withdraw. Retirement consumption follows endogenously. In the consumption approach, in contrast, individuals specify retirement consumption exogenously. Investment and withdrawal policies follow endogenously. We explore these two approaches in detail. Consistent with habit formation, we allow for excess smoothness and excess sensitivity in retirement consumption.
Publisher
Cambridge University Press (CUP)
Subject
Organizational Behavior and Human Resource Management,Economics and Econometrics,Finance,Organizational Behavior and Human Resource Management,Economics and Econometrics,Finance
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